2013–2014 TOWER FOUNDATION ANNUAL REPORT

The figures in the 2013–2014 Tower Foundation Annual Report tell the story of San José State: a story about students, faculty members and alumni who pursue what inspires them to create change in the world. The generosity of San José State’s donors makes those pursuits possible, shaping the paths of so many Spartans. —Amir Mashkoori, ’84 Business, ’86 MBA Chairman of the Board

mohammad qayoumi President, San José State University

amir mashkoori, ’84, ’86 Chair of the Board

cynthia lazares, ’76 Vice Chair

wanda ginner, ’68 Treasurer and Chair, Finance and Investment Committee

rebecca a. dukes Chief Executive Officer

leslie rohn Board Secretary (ex officio)

constance b. moore, ’77 Immediate Past Chair

john w. baird Chair, Nominating and Governance Committee

keith barnes, ’76 Chair, Audit Committee

shawn bibb SJSU VP for Administration and Finance

gene bleymaier SJSU Athletic Director

laurence boucher, ’69, ’70

phillip r. boyce, ’66

stephen caplan, ’65

dana c. ditmore

charles w. davidson, ’57 Founding Chairman of the Board

andrew hale feinstein SJSU Provost

leslie c. francis, ’65

wanda hendrix, ’77, ’94

anthony jackson, ’71, ’73, ’11

jim jimenez, ’68,’75

michael kaufman Faculty Representative

carolyn lewis, ’70, ’71 Alumni Association Representative

donald l. lucas, ’59

jenny ming, ’78

edward oates, ’68

joseph p. parisi

robert pisano, ’65

kim polese

avesta sabetian Student Representative

gary j. sbona, ’66

peter v. ueberroth, ’59

beth von till Faculty Representative

david weng, ’83

Board of Directors 2013 – 2014

The Tower FoundationThe Tower Foundation is San José State’s auxiliary organization dedicated solely to philanthropy. Formed in April 2004, the foun-dation encourages private gifts, trusts and bequests for the benefit of San José State, and fully manages, expends and accounts for all university donations.

By serving on the Tower Foundation Board of Directors, prominent alumni and citizens are engaged in the life of the university. Board members play an important role in advising the university president on campus issues and in shaping philanthropic strategy. They work closely with university leaders to reach out to graduates and businesses to build support and funding for San José State. Board members are the university’s philanthropic leaders, and make annual contributions to San José State.

The Board of Directors is composed of up to 35 community members, most of whom are San José State alumni. The board appoints members for three-year terms. Board members elect officers who serve one-year terms. Six ex officio members, including San José State’s president and members of his senior cabinet, also serve on the board.

The board’s five committees are the Executive, Finance & Investment, Nominating & Governance, Development, and Audit Committees. Committees advise the foundation on campaign development, investments, audit compliance, public rela-tions and long-range planning. The board meets four times a year, and committees meet as needed.

CONDENSED SUMMARY OF NET POSITION

06/30/14 06/30/13 06/30/12

ASSETSCurrent assets $32,255,980 $29,655,543 $26,432,254Other noncurrent assets 136,859,131 119,494,501 88,368,518Total assets $169,115,111 $149,150,044 $114,800,772

LIABILITIESCurrent liabilities $1,813,899 $851,602 $627,424Noncurrent liabilities 613,936 692,032 730,416Total liabilities $2,427,835 $1,543,634 $1,357,840

NET POSITION RESTRICTEDNonexpendable endowments $89,462,566 $83,615,427 $63,274,018Expendable:Endowments 8,073,959 7,394,148 6,369,471Other 62,595,487 51,165,750 39,133,943

UNRESTRICTEDBoard designated 585,965 402,965 312,965Other 5,969,299 5,028,120 4,352,535Total net position $166,687,276 $147,606,410 $113,442,932

CONDENSED SUMMARY OF REVENUES, EXPENSES AND CHANGES IN NET POSITION

06/30/14 06/30/13 06/30/12

OPERATING REVENUESGifts, pledges and bequests $14,710,571 $22,564,272 $11,738,658Nonmonetary gifts 766,481 14,448,354 220,609Administration fee income 2,950,213 2,282,027 1,803,087Other operating revenues 236,738 262,366 281,195Total operating revenues 18,664,003 39,557,019 14,043,549

OPERATING EXPENSESSupport activities of SJSU 15,636,746 15,321,697 12,089,801General and administrative 1,640,131 1,293,950 1,176,803Total operating expenses 17,276,877 16,615,647 13,266,604Operating income 1,387,126 22,941,372 776,945

NONOPERATING REVENUES (EXPENSES)Interest income 826,886 940,790 908,941Net increase (decrease) in fair value of investments 16,848,658 8,616,998 (1,562,650) Total nonoperating revenues (expenses) 17,675,544 9,557,788 (653,709) Other changes in net position 18,196 1,664,318 1,258,414 Changes in net position 19,080,866 34,163,478 1,381,650

NET POSITIONBeginning of year 147,606,410 113,442,932 112,061,282End of year $166,687,276 $147,606,410 $113,442,932

Financial OverviewFor the year ending June 30, 2014, the Tower Foundation was audited by McGladrey LLP, Certified Public Accountants. The audit was conducted in accordance with generally accepted auditing standards and, in their opinion, the financial statements presented fairly, in all material respects, the financial position of the Tower Foundation as of June 30, 2014. Their independent auditor’s report expressed an unqualified opinion, and conformed with accounting principles generally accepted in the United States.

Total Tower assets increased $20 million from fiscal year 2013 to fiscal year 2014 due to increases in restricted cash and investments. This compares with an increase of approximately $34.3 million from fiscal year 2012 to fiscal year 2013, which was primarily due to increases in the endowment, notes receivable, cash and short-term investments. Current assets increased $2.6 million from 2013 to 2014 primarily due to an increase in cash and cash equivalents. Current liabilities increased $1.0 million from 2013 to 2014, primarily due to increases in accounts payable and accrued liabilities.

Gifts, pledges and bequests decreased by $7.9 million from 2013 to 2014 due to the culmination of the comprehensive campaign in 2013 and increased by $10.8 million from 2012 to 2013. Nonmonetary gifts decreased by $13.7 million from 2013 to 2014 and increased by $14.2 million from 2012 to 2013. Tower’s administrative fee income increased by $0.7 million from 2013 to 2014, primarily due to an increase in the endowment investment portfolio. Other operating revenues decreased $25,628 from 2013 to 2014 due to a decrease in other income.

Expenses shown as “Support Activities of SJSU” represent the use of gift funds by the campus for schol-arships and academic programs. The funds represented $15.6 million in 2014, an increase of $0.3 million from 2013. General and administrative expenses increased by $0.3 million from 2013 to 2014, and they represent 8.8 percent of operating revenue.

● Program and faculty support

● Academic scholarships

● Athletic scholarships

Investment performance

one-, three-, five-, seven- and ten-year returns

20%

15%

0%

5%

10%120

110

100

90

80

70

60

50

40

30

20

10

0

Market value in millions of dollars

05–06 through 13–14

Use of Endowment FundsEndowment funds are critical to maintaining San José State’s excel-lence, helping the university to deliver on its mission and providing a measure of stability over time. When donors establish an endowment fund, targeted to specific purposes that align with their priorities and passions, they create a permanent legacy of support for SJSU. These funds enhance state funding and student fees to support important faculty development as well as academic and athletic scholarships.

Market Value and Investment PerformanceIn fiscal year 2013–2014, San José State’s endowment experienced significant growth from new endow-ments and gains in the investment portfolio. The endowment ended the year at $117.7 million.

Our portfolio yielded a 15.8 percent investment return. We continue to work closely with our invest-ment firm to balance capital preservation, return requirements and risk, while taking advantage of prudent market opportunities.

The Tower Foundation continues to perform well relative to other CSU foundations. The 10-year return is 5.9 percent, the seven-year return is 3.0 percent and the five-year return is 12.5 percent. As with the broader market, our seven- and 10-year returns reflect the impact of the 2008–2009 global financial crisis.

● Large cap equity ● Alternative investment● Small cap equity ● Real estate● Emerging markets equity ● Commodities● Fixed income ● Other● International equity

Annual contributionsin millions of dollars

fy 08–09 through fy 13–14

0

5

10

15

20

25

Annual distributionin millions of dollars

fy 08–09 through fy 13–14

0

1

1.5

2

2.5

3

3.5

4

The return to more stable markets is a gradual process, and it will take several more years to recoup the losses sustained in prior years. We are confident that the endowment investment portfolio is posi-tioned well, from both a risk and a return perspective, to support the university and its programs well into the future.

Endowment InvestmentThe Tower Foundation Investment Policy frames our investment strategy and establishes asset classes in a mix of common stocks, bonds, cash equivalents and alternative investments. The Tower Board, manage-ment team and investment advisors are focused on long-term results relative to the policy, believing they are the most meaningful to a sustainable future. We recognize that in order to achieve our investment objectives over extended periods, performance has to substantially exceed the objective during some periods in order to compensate for shortfalls during others. Regardless of challenging short-term markets, the Tower Foundation makes an annual distribution to the endowment’s designated programs in order to ensure steady and predictable support to the campus.

Annual DistributionsOur endowment spending rate strikes a balance between generating a predictable stream of annual support for current needs of the campus and preserving the value for future generations. Protecting and growing our endowment is an essen-tial investment in the long-term quality and health of San José State.

The Tower Board approved a 2013–2014 distribution of $3,914,952 based on the average market value of the endowment over the previous three years. With more favorable investment returns in the past year, the distribution was increased to 4.2 percent.

Annual ContributionsNew gifts continue to be added to the SJSU endowment even in the current challenging times. In fiscal year 2013–2014, $7.03 million in new principal was added to the endowment. During the past three years, $29.9 million has been added to SJSU’s endowment.

Help fellow Spartans find their paths. Giv securely online at sjsu.edu/giving.

2013–2014 Tower FoundaTion annual reporT creaTed by SJSu MarkeTing and coMMunicaTionS, diviSion oF univerSiTy advanceMenTcharTS and graphS: evan Suarez, ’15 bFa graphic deSign